Elizabeth Judge | February 10, 2009
THE prospect of a tie-up between Vodafone and 3UK, the "next-generation" mobile operator, has moved closer following the merger of their Australian businesses.
Vodafone, Europe's biggest mobile company, is to merge its business in Australia with the domestic mobile phone business of Hutchison Whampoa, the Hong Kong conglomerate behind the 3 brand.
The 50-50 joint venture, which will market its products under the Vodafone brand, reignited speculation about a tie-up between Vodafone and 3 in the UK. Vodafone has said in the past that 3's mobile assets were a likely target for any mobile player seeking to act as a consolidator in the cut-throat markets of Western Europe.
As Vodafone confronts the economic downturn, a move to create a stronger operator in the UK _ one of the most competitive mobile phone markets _ could appeal.
Citigroup said in a note that the market would "reopen thought of parallel deals in the UK or Italy".
Since its launch six years ago as the UK's first "next-generation" 3G mobile phone company, 3 has failed to make the impact that it had hoped for. The new 3G technology was beset with problems _ one executive said that 3G handsets were hot enough to fry an egg on _ and the group was forced to focus on cheap voice and text deals, rather than premium video calling and internet surfing services.
Under the Australia deal, Vodafone will receive a deferred payment of $500 million from VHA, the name for the new venture. Vittorio Colao, Vodafone's chief executive, said that the tie-up would "create a company with the necessary scale to compete strongly in the mobile market".
Vodafone said: "This is just in Australia. There are no plans for the UK." Analysts said that in the UK a merger of T-Mobile and 3 was likelier.